“We don’t inherit the world from our parents,We borrow it from our children.”

Sioux Indians

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Centres of Family Business Learning

Harvard Business School Babson Business School

IMD Business School INSEAD Business School

Kellogg School of Stetson University School of

Management Business Administration

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Research

• Families may fail to recognize that family business conflict results from a

lack of participation and limited opportunities for the family to constructively

explore individual differences related to values, goals and vision

– T.Hubler, ‘The Ten Most prevalent obstacles to Family-Business Succession Planning’,

Family Business Review, XII(2)(1999) 117-21

• Craig Aronoff and John L. Ward, based on their as family business

consultants, suggest that such family meetings teach communication skills,

encourage independence and build self-esteem

– C.E.Aronoff and J.L.Ward, Family Meetings: How to Build a Stronger Family and a

Stronger Business (Marietta, GA: Business Owners Resources, 1992)

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Research

• 80% of the families have gone bankrupt, or have sold or acquired over the

past 50 years. Families business statistics offer a similar picture, with only 3

out of 10 family businesses surviving into the second generation, and only 1

out of 10 handed down to a third. The average life span of family firms (after

a successful start-up) is 24 years, which coincides with the average time the

founder is associated with the company.

– Beckhard, R. and Dyer, W. (1983b). ‘Managing continuity in the family-owned business,’

Organizational Dynamics, 12: 5-12.

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Family Constitutions

Global Families Indian Families

Ford Motor Company GMR Group

Marriott International Dabur Group

Cargill Murugappa Group

Perrier Mineral Water Apollo Hospitals

Heineken Beer Godrej

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The Family Business Opportunity

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India Tops in Family Feuds over Family Wealth

• Forty percent of the globe's wealthy population have direct experience of

their family fortune leading to disputes, but the percentage is even higher in

India, where 61% of the rich have seen relationships deteriorate into feuds

over money, according to a new report. In contrast, 53% of respondents in

Singapore, 51% in Hong Kong have experienced family tension as a result

of wealth, as against just 11% in Qatar.

• 35% of global high net worth individuals do not have confidence in their

children to protect their inheritance.

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Source: Barclays

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Medium Term Business Strategy

Ownership and Management Succession

Development of NextGen

Estate, Investment and Safety Net

Continuity Planning

Capitalism

v/s

Socialism

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Business Family

Perspectives in Family Business Governance

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FAMILYHealth, Prosperity,

Continuity role, Communication,

Education, Values, Goals

BUSINESSOperations,

Finance, Employees, Supplier and

Customer Relationships

OWNERSHIPLiquidity, Capital

Allocation, Assuring Succession,

Strategic Direction, Performance

Source: Renato Tagiuri and John Davis

Evolution of Business Families

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IDominant

Owner-Manager

(Controlling Owner)

IISibling

Partnership

(Oligopoly of Owners)

IIICousin

Collaboration

(Fragmented Ownership)

Success Requirements

100% / 33%

Attract Competent heirs

Let Go of Control

16% / 8%

Strategy and Management Revitalization

Teamwork Family Leadership

4% / 2%

Cultural and Capital Adaptability

Freedom, Voice, Loyalty & Exit

Achilles’ Heels Control of Family Death of “Mom” Lock-Ins

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Contradictions

Individualism Personal Control Secrecy and Privacy

Collectivism Mutual Dependence Open and Equal Sharing

Professionalism Voluntary Association Inequality Accepted

Fundamental Attitudes Stewardship Trusteeship Social Purpose

Decisions Partners Must Make

• How shall we take decisions?

• What will our code of conduct be?

• What will our leadership model be? If a single CEO, who will that person

be?

• How shall we accommodate the simultaneous goals of the family and the

business?

• Who shall our advisors be? Who should be on our board of directors?

• How will we make this business grow? What should our strategy be?

• How will we communicate with non-family executives?

• What policies will we put in place?

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Sample Policies

• Rights and Obligations of Individuals/Women/Non-Employed Owners

• Role of Family Members in the Business

• Employment/Compensation/ Performance Evaluation Policy

• Family Fun/Bonding

• Safety Net

• Media Policy

• Conflict of Interest

• Family Education and Mentoring Policy

• Philanthropy

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Sample Processes

• Managing Succession

• Managing Differences

• Constitution Review

• Information /Reports

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Sample Structures

• Family Council

• Family Business Board

• Independent Board

• Non Business Family Forum

• Family Safety Fund

• Family Office for Investments

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Some Ownership Policies

• Conditions for ownership and voting rights

• Dispute resolution process

• Dividends / Drawings

• Redemption process

• Business valuation methodology

• Buy-sell agreement (shareholder’s agreement)

• Rights and responsibilities of non-employed owners

• Rules for travel and other major expenses

• Addressing family member’s financial problems

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"There is a tide in the affairs of men. Which taken at the flood, leads on to fortune; Omitted, all the voyage of their life is bound

in shallows and in miseries.”

William Shakespeare

Resources and Acknowledgement

• Family Businesses: The Essentials, Leach, Peter, 2007

• 9 Elements of Family Business Success, Fishman, Allen E., 2009

• Getting Along in Family Business: The Relationship Intelligence Handbook,

Hoover, Edwin A., Hoover, Colette Lombard, 1999

• Perpetuating the Family Business, Ward, John L., 2004

• Business Maharajas, Piramal, Gita, 1997

• Family Meetings: How to Build a Stronger Family and a Stronger Business,

Craig E. Aronoff, Ph.D. and John L. Ward, Ph.D., 2002

• Developing Family Business Policies: Your Guide to the Future, Craig E.

Aronoff, Ph.D. , Joseph H. Astrachan, Ph.D. and John L. Ward, Ph.D .,1998

• Family Business Values: How to Assure a Legacy of Continuity and Success,

Craig E. Aronoff, Ph.D. and John L. Ward, Ph.D .,2001

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